# A Once-Great Copper Miner Faces a Reckoning Just as AI Power Demand Soars > Source: > Published: 2026-07-07 10:00:26+00:00 (Bloomberg) -- As global demand for copper surges, one of the world's biggest miners finds itself in a precarious state. Most Read from Bloomberg Chile's state-owned Codelco, long the backbone of the country's mining industry and a crucial source of government revenue, is struggling under $25 billion of debt and its lowest output in 28 years. It's also contending with a series of controversies, including a fatal accident and probes into inflated production figures. Those difficulties have prompted concern that Codelco's model is failing to capture the benefits of near-record copper prices as artificial intelligence and the energy transition boost consumption of the metal. They've also sparked a debate that would have been almost unthinkable just a few years ago: Does Codelco need to shelve its growth ambitions and give a larger role to private capital? It's a question that has taken on new urgency since conservative hard-liner José Antonio Kast took office as Chile's president earlier this year, marking the sharpest rightward shift since Augusto Pinochet's dictatorship a half-century earlier. Even in Chile's new government, few politicians advocate denationalizing Codelco, making radical change unlikely. Formed in the 1970s when Chile wrested control of massive mines from US companies, Codelco became a symbol of economic sovereignty. It now occupies a near-sacred place in the country's political history, having survived a wave of industry privatizations under Pinochet. But with the copper market poised for the largest shortfall in history, policymakers and industry groups are exploring ways to overhaul the miner to cut debt and improve returns. Options range from selling assets and curtailing spending to expanding joint ventures and infrastructure sharing. If Chile doesn't act, Codelco risks largely missing out on a watershed surge in copper consumption that's sent prices for the metal to record highs."Without copper, we don't have AI, air conditioners, electric vehicles, or the modern economy," billionaire mining magnate Robert Friedland, whose I-Pulse Inc. recently began working with Codelco on a new way to crush rocks, said in an interview last month. "Codelco remains wildly important." Scrutiny of Codelco has intensified over the past year. In late July of 2025, a collapse at El Teniente, Codelco's most profitable mine, killed six workers in Chile's deadliest mining accident in decades and halted work in key expansion areas. An internal audit found "inconsistencies and concealment" in technical reports relating to a rockburst at the same mine two years earlier, prompting the removal of three executives. Prosecutors and regulators are investigating whether those 2023 reporting failures affected oversight of risks before last year's fatal collapse. Codelco is also facing multiple probes into inflated production figures that allowed it to meet output targets. An internal review revealed that the miner had overstated its 2025 copper production by almost 27,000 metric tons, equivalent to about 2% of output. The scandals have energized a long-running debate over whether Codelco needs a more fundamental overhaul. The over-counting case has coincided with the arrival of Chairman Bernardo Fontaine, an economist and businessman appointed by Kast in May. Fontaine and senior ministers launched an unusually sharp critique of Codelco's performance under former chairman Maximo Pacheco and pledged to revamp operations, finances and corporate governance. Responding to the production overstatement that triggered bonus payments, Economy and Mining Minister Daniel Mas described the company as "out of control," comments that likely unsettled private-sector partners and holders of more than $20 billion in international bonds. The debate highlights the challenges facing Chile's copper industry, where production has plateaued despite more than $100 billion of mining investment over the past decade, according to estimates by the country's Mining Council. Codelco's problems have emerged against a backdrop of rising public debt and persistent fiscal deficits in Chile, reducing the government's capacity to support the company's investment needs. Those constraints matter well beyond Chile. BloombergNEF is warning of an unprecedented global copper shortfall of 7 million tons by 2035, based on market conditions today. While copper markets have historically swung between surpluses and deficits as part of normal economic cycles, the coming imbalance is different because it is being driven by structural forces: rapidly rising demand colliding with declining ore grades, aging mines and a lack of new projects. Chile illustrates that challenge, according to Kwasi Ampofo, BNEF's head of metals and mining. Based on BNEF's long-term supply model, Chilean production is projected to fall from about 5.4 million tons today to roughly 4.2 million tons by 2050 as existing mines are depleted. Codelco is particularly exposed because its mines are becoming deeper and more complex, requiring greater capital investment. The company's ore grades — a measure of how much metal is inside a mined rock — are declining, increasing costs and reducing how much copper can be recovered. Codelco produces copper at a cost that's more than 50% above the average of the three largest global copper miners. Unlike other major producers, the state-owned miner has remained overwhelmingly concentrated in a single country. Meanwhile, copper demand from AI, data centers and the defense sector is expected to roughly triple by 2040, adding a combined 4 million metric tons of annual demand, according to an S&P Global study. And consumption may rise in the aftermath of the US-Iran war as heightened geopolitical tensions reinforce spending on electrification, renewable energy, AI and defense, Goldman Sachs Group Inc. analysts including Samantha Dart wrote in a note to clients last month. "We see investment in ageing Western power grids as a national-security priority, due to its critical role in AI and energy security," they said.Chile remains the world's largest copper producer, but its share of global output has fallen from more than a third in the mid-2000s to less than a quarter today. At the center of that decline is Codelco, whose production is languishing at about 30% below levels envisioned two decades ago, while debt metrics are among the industry's worst. As Chile debates how to revive its national champion, the outcome will help determine whether the world can bring enough new copper supply to market. Fontaine, a longtime critic of Codelco's governance and efficiency, is leading a strategic review aimed at restoring profitability, reducing debt and improving transparency. That includes evaluating the company's portfolio to determine whether to defer investments or pursue asset sales or partnerships, he told members of Chile's lower house on June 24. Fontaine has vowed to "put the house in order" and not to produce "for the sake of producing." "Our effort is for Codelco to become profitable again. We do not need to be big; we need to be profitable," he said. Codelco didn't immediately respond to requests for comment.Influential Chilean copper research and consulting group Cesco has laid out proposals that would allow Codelco to spin off undeveloped exploration assets and raise funding through capital markets, Cesco Executive Director Jorge Cantallopts said in a June interview. Another involves reorganizing Codelco into a holding company with more autonomous divisions, improving accountability and creating greater flexibility to partner with rivals. Juan Carlos Guajardo, founder of the Plusmining consultancy, argues that deeper changes are needed. To stabilize its finances, Codelco may need to dispose of some assets, close others and decentralize its structure, he said. Such efforts would require careful maneuvering to avoid labor unrest, given the state-owned miner's workforce exceeds 76,000 people, including contractors. Above all, the company should abandon its goal of returning to pre-pandemic annual production of 1.7 million metric tons and instead consolidate around current levels of roughly 1.3 million tons or even less, Guajardo said. "The company lacks the capacity to produce" more than that, Guajardo said. "Forcing it toward that goal has been part of the explanation for the crisis." In an early June presentation, Chile's copper commission noted that Codelco had consistently missed targets since at least 2020, citing recurring weaknesses in planning and operational execution. It also flagged unusually large December production spikes that, following the internal audit into overstated 2025 output, have fueled broader questions about the company's production reporting. A more decentralized structure could also open the door to partnerships at existing mines. Until now, joint ventures with major miners have largely been limited to exploration because Codelco can't sell all or part of its legacy assets.But sharing capital and risk on certain expansions, or partnering with neighboring private-sector operations, could be possible. "It needs to be capitalized, which is very different from privatizing," said Carlo Arqueros, a right-wing lawmaker and member of the lower house mining and energy committee. "These projects, or joint capitalization initiatives, are one alternative." To be sure, Pacheco argued in the final days of his tenure as chairman that the company had already adopted a stronger focus on capital discipline and operational stability. He said Codelco's debt burden largely reflects the need to catch up after decades of underinvestment while continuing to hand over its profits to the government as well as make payments that are a legacy of Chile's military era. Right-wing lawmaker Jorge Alessandri, the head of Chile's lower house, said in an interview that Codelco's mounting debt is fueling debate over structural reforms. Still, any move to introduce private capital directly into Codelco or its legacy mines would require congressional approval and potentially constitutional changes, making it politically difficult. Alessandri stopped short of endorsing privatization, saying Chileans should continue to own Codelco. But he pointed to Codelco's agreement, under the previous administration, to integrate its Andina mine with Anglo American Plc's adjacent Los Bronces operation as evidence that even left-leaning leaders see public-private cooperation as necessary. "If they did it, it's because the situation is critical and it was the only way to save it," he said. Most Read from Bloomberg Businessweek ©2026 Bloomberg L.P.